When auto insurers look at the road ahead, they see a number of risks, from car-sharing services like Uber to potentially super-safe autonomous vehicles to an overall decline in car ownership.
How does the staid world of car insurance not only survive, but find opportunities for new growth?$3.5 billion CSAA Insurance Group believes it will happen by upgrading its technology infrastructure, creating new programs for employees and leaders, and investing in innovation both inside and outside the company’s walls.
Tracing its roots back to 1914, CSAA was originally launched to offer insurance to members of the California State Automobile Association. Today, the Walnut Creek, Calif.-based firm sells car insurance, homeowner’s insurance, and other insurance products to members of AAA clubs in 23 states and Washington, D.C.
In 2016, amidst a major overhaul and modernization of CSAA’s IT infrastructure, the company named Debbie Brackeen as its Chief Strategy and Innovation Officer. She had previously been the Global Head of Innovation at Citi Ventures.
Brackeen was responsible for heading a newly-implemented team called the Innovation Acceleration Organization, tasked with building innovations that could generate $1 billion in revenue before 2026.”That’s a pretty big bar. We’re a $3.5 billion company, so that’s no small feat,” she says. “What I like is that it’s so audacious that there’s no way we’re going to achieve that just by doing the same thing that we’ve been doing for the last 100 years.”
Reporting directly to CEO, Brackeen oversees the Innovation Acceleration Organization’s labs, and a team of about a dozen full-time employees. She says she expects the team, split into three subgroups of strategy, innovation partnerships, and corporate ventures, to expand to 20 by 2019.
Setting Up a Venture Capital Initiative
Brackeen has recently established a corporate venture capital fund, allowing CSAA to make minority equity investments in startups. This has enabled the ventures group to begin scouting, working with, and potentially investing in startups that can help CSAA grow its digital offerings. Among the venture group’s areas of interest, according to a job posting: insurtech, autonomous vehicles, connected car solutions, analytics and artificial intelligence, and applications of blockchain technology. Since launching, the team has made one investment in a “stealth startup,” one that hasn’t yet announced what it is working on.
“I view us as strategic investors,” Brackeen explains. “We’re investing in companies that we think can be materially relevant to our future. We are looking to partner with appropriate companies and commercialize solutions with them to every extent that we can, and also introduce those companies to other members across AAA.”
To further immerse itself into startup innovation, Brackeen says CSAA will be opening an office in Silicon Valley in 2018: “Co-located with the venture investments team will be a lab environment where we can kick the tires with startups who might not be portfolio companies, but may be relevant to some solution that can give to our customers.”
‘Digital and Mobile Access to Everything’
According to Brackeen, CSAA’s investments began roughly five years ago with an overhaul and major update of its IT infrastructure.
“Any business that was conceived before we had on-demand computing and computers in our pocket needs to be fundamentally rethought,” Brackeen expands. “You cannot over-emphasize the importance of digital and mobile access to everything, which is why it was so important for us to make the investments we did in the last five years of transforming our underlying IT infrastructure. A big part of that was…creating the foundation on which we could building really meaningful mobile access solutions for our customers.”
Brackeen observes that insurance startups like Lemonade (for homeowners and renters) and Metromile (per-mile car insurance) have been attracting customers by offering “a much simpler, quicker user interface or user experience when you sign up for something like renter’s insurance.”
She has been pushing CSAA to follow suit, streamlining its own ability to offer quotes and acquire new customers. “We have a solution that we’ve built in conjunction with transforming our infrastructure called MyPolicy,” Brackeen says. It gives customers the ability to get fast — and accurate — quotes online.
Addressing Changing Transportation Dynamics
Another trend that Brackeen’s team has noted is changing driving behaviors, which could include the adoption of driverless cars, more ridesharing, and less car ownership in the future.
Brackeen says, “If you look at the long-term trend, or threat, of autonomous vehicles, what we now underwrite as personal liability for drivers is going to transform to product liability in the case of a fully autonomous car that doesn’t have a driver.” That means that owners and manufacturers will bear responsibility for accidents, rather than drivers.
She continued, “The sharing economy and how people are getting around is definitely changing. It is a nearer-term impact that could potentially cause personal auto premiums to decline.”
Despite this threat, Brackeen and her team are looking at it as an “opportunity space” for new products.
“We have a lot of customers who have personal insurance with us that are also Uber/Lyft drivers. We’ve introduced a rideshare endorsement, so when you’re driving as an Uber/Lyft driver, it’s no longer a personal liability situation. They’re covered in that commercial scenario,” she explains.
As another example, Brackeen noted a new partnership that CSAA has begun with Lyft that was recently piloted in Northern California. While insured customers who’ve had fender-benders would previously have had just one option — get a rental-car — CSAA now also offers “a Lyft credit in lieu of a rental car when [the customer’s] car is in the shop,” Brackeen says.
Navigating Culture, Regulation, and the $1 Billion Goal
With her team, new labs, and the venture capital initiative, Brackeen says her objective is not only growing revenue, but also to “infuse innovation into the culture of CSAA.”
When it comes to working in a legacy company within a heavily-regulated industry, Brackeen asserts, “I think regulation can be used as an excuse. … Constraints are real, but that shouldn’t prevent us from thinking of different ways that we can solve customer needs and address emerging problems.”
While there are a lot of “wonderful things” that come with a company’s successful legacy, there are also challenges,” she says.
“I see [challenges] show up primarily in the form of mindset” she explains. “I view my team’s role as helping our leaders and employees understand that the world we’re living in today requires that we be more ambidextrous. We know how to run our core business, and there’s many things about the way we run that carry forward into the future. But just because we’ve always done things one way doesn’t mean we need to do it that way.”
Training Employees and Gathering Ideas
In 2016, CSAA began piloting and implementing innovation training for all company employees. This half-day workshop, called Drive Innovation Training, was first piloted in collaboration with CSAA’s Services Organization, a group of roughly 100 people which focuses on customer service.
Brackeen explains: “While we don’t want everybody in the company working on disruptive innovation ideas, we do want everybody to be looking out for opportunities to do things that are faster, cheaper, and a better value add for our customers,” Brackeen says.
The company then implemented a “lightweight process” where employees could submit their ideas. Within six months of the pilot, over 1,000 ideas have been submitted. “We’ve had internal wins of dramatically increasing savings, because we just brought in opportunities to do something much more efficiently,” Brackeen says.
A New Incentive Program for Executives
For company executives, Brackeen’s team has also implemented a bonus opportunity called the Velocity Program. The program’s annual goals, communicated to the executive-level participants, correlate to the innovation team’s challenge to come up with new concepts that can generate $1 billion in revenue over a decade. Brackeen described this program as “lean startup adapted to enterprise.”
“It’s part of our long-term incentive bonus program for our executives, so everybody understands they have some skin in the game. … The program will build a portfolio of growth initiatives at different stages in the stage-gate model. … We’ll have different opportunity areas that we’re hunting in.” The first opportunity area, she says, is “the challenge of new mobility and how people are getting around.”
So far, within the Velocity Program, a small team of people with interest in that area have already generated hundreds of ideas, and “honed them down to just a handful,” according to Brackeen.
“These are still very early-stage validation concepts, but as we progressively go through the process and validate some of these concepts, we will ultimately launch prototypes and pilots into market,” Brackeen says.
Once these ideas are on the market, Brackeen’s team will track their progression. While Brackeen wouldn’t disclose how much revenue they had generated so far, she says that as her team expands, they will continue to emphasize both revenue- and culture-based goals.
Going forward, she says, “We’ll continue to build on that foundational work… [creating] a culture of entrepreneurship where our employees can think and build on their own as entrepreneurs, addressing new customer problems that they see emerging in the marketplace.”